Published date: 28 May 2019 Updated on: 06 Apr 2020 The Indian rupee has not done very well against the US dollar in the past few decades. The graph below depicts how the Indian rupee has done against the US dollar in the past decade. The Indian rupee hit lowest against the US dollar on October 9th 2018, when it was INR 74.34 against the USD. The rupee has gained a little since then and stands around INR 70 per dollar at present, and India Ratings expects it to average Rs 69.79/$ in the Financial Year 2019. Need Free Help In Arranging Finances To Study Abroad? Fill this form and get a call from counsellor? The impact of falling rupee is felt on the Indian economy in all sectors, and this decline is most unfortunate for Indian students who are headed to foreign universities for their higher education. When the price of the Indian rupee falls, students who are already studying in foreign destinations - such as the USA, Australia or Canada - or those who plan to head there have to pay more to fund their education and this has translated to Indian students thinking twice before heading abroad for foreign studies. Even now, when the Indian rupee is seeing a constant up and down, one of the primary concerns of most students planning for foreign education is how it will affect their finances and what steps can they take to hedge. Let us take a look at some of the impacts that the falling rupee has on students planning for foreign education and what steps they can take to mitigate some of the effects of the falling rupee. 1. Impact of Falling Rupee on the Education Loan For students studying in countries like the USA, the falling rupee has a direct influence on their finances. Not only does the cost of living increase for students already in countries like the USA but the tuition fee also increases for both students who are currently studying there and students who are planning to go there. Consequently, students who are dependent on education loan for abroad studies will have to borrow more and then repay more too. Though the effect of the depreciation of rupee depends on the destination country for their foreign education, students going to countries like USA, Canada and Australia will certainly have to bear the brunt of this decline. Also, since the education loan for abroad is mostly in Indian rupee and students have to pay their tuition fee and other expenses in foreign currency, the total cost of education abroad would certainly increase. Expenses Tuition Fees - The downslide of Indian rupee means that students would now have to shell out more for tuition fee. A student whose annual tuition fee is $100,000, would have paid approximately INR 63,00,000 for the first year tuition fee in the first quarter of 2018. However, with the decline in Rupee value, he would now have to pay approximately INR 70,00,000 for the second year. Application Fee - Most Universities in US charge an application fee, which differs from college to college and from program to program. This would again increase with the downward slide of the Indian Rupee. Exam Fee - International students applying to universities in the UK U.S, Australia, and Canada need to submit their score of English language proficiency tests such as TOEFL or IELTS along with scores of GMAT or GRE. The registration fee for TOEFL is between $160- $250. This means that the fee in INR was between INR 10,080 and 15750 in early 2018 and is between INR 11,200 and 17,500 in 2019 May. The exam fee for GRE is $205 which translates to an increase of 1435. The same is also true for GMAT, that has a registration fee of $250. Living Expenses- The cost of living in countries like U.S, Canada and Australia is not cheap and it depends on factors like the area the student stays in, number of roommates, how he or she socializes, etc. Most students end up spending between $12,000 and $15,000 a year, give or take a few hundred dollars here and there. In Indian currency, students would have spent between Rs 7,56,000 and Rs 9,45,000 in the first quarter of 2018. However, this expense would become between INR 8,40,000 and 10,50,000 in June 2019. 2. Impact on the Number of Students Opting to Study Abroad Irrespective of the dip in the Indian currency, the total number of students opting to study abroad has not decreased. The graph below shows how the number of outbound students to top five foreign destinations has only seen an upward trend. This growth is fuelled by growth in the Indian Middle classes as they aspire a foreign education for their children. However, when we dig deeper into the surface, we come to know between 2011 and 2013 - when the Indian Rupee saw a record depreciation of 44% against the U.S dollar, the impact of falling rupee was seen in the number of Indian students going for foreign education. This number decreased drastically and this dip is clearly shown in the graph above too. 3. Impact on the Popularity of Traditional Destinations The U.S had long been the most popular international study destination for Indian students. Canada, Australia and the UK were other popular international study destinations for Indian students. In the year 2000, the US had 59% of all overseas Indian students while Australia had 7%, the UK has 6% and Canada had less than 1%. However, with rupee crashing, the percentage of Indian students headed towards these countries changed and by 2015, U.S had only 47% of all overseas Indian students while Australia had 13% and Canada had 17%. The total overseas Indian students in the UK remained stagnant at 7%. At present, Indian students are also looking at other countries such as Austria, Germany, Belgium, Norway, Germany, Ukraine and New Zealand - all of them offer quality education at affordable costs. The number of Indian students in Germany has increased three times between 2010-2011 and 2016-2017 and were 15,529 students in 2016-2017. Similarly, 30% of all international students in the UAE are Indians. Students who opt for non-traditional study destinations such as the above-mentioned countries should take into account factors such as quality of education in the country, global reputation of that particular University, immigration-friendly policies of the destination country for graduate students and overall economy of the country. 4. How to Hedge The depreciation of the Indian rupee, as expected, is making Indian students anxious who are already studying in a foreign destination or planning to enroll. However, if we analyze the situation in depth, we might understand that this fall in the Indian rupee should not be a deterrent in your foreign education dream. With careful planning and execution, students should be able to hedge this fall. Let us take a look at how students can mitigate the effects of the falling rupee and how to manage extra expenses. Look for ways to earn in dollars from your rupee investment - Students can hedge the effects of this downfall in the rupee if they earn in USD from their INR investments. For this, students can invest in ETFs, dollar -denominated bonds, or use Liberalized Remittance Scheme to invest in mutual funds, foreign stocks and exchange-traded funds that might be unavailable in India. Parents of students who are aspiring to study abroad can also buy gold to hedge through these changes. Even international funds, such as Nasdaq 100 ETF, Franklin US Opportunities Fund, Nasdaq 100 ETF etc that are available in India are a good option to hedge from the falling rupee. These funds will protect them against the fall in rupee. Work in the foreign soil for a decade - If taken an education loan in INR then make a plan to work in the US for coming years. They would be earning in USD and repaying the loans in INR, and since the USD has gained over the INR in the last few years and would continue to do so, the total amount that they would be repaying in USD would be less than they actually borrowed. Personal savings - Dipping into personal savings is another way to hedge from this downfall of the rupee. Rather than taking up more education loan, which would mean more interest, students can use funds from their personal savings to fund the extra expense caused by the fall in the rupee. Invest in the futures market - Students can also buy INR/USD currency future and use contract expiry that matches their requirement date. This will help them gain in the futures market and hedge themselves against any further devaluation in the rupee while simultaneously offsetting the incremental expenses. Top-up loans or transfer of loans - Another method is to take a top-up loan from the same financial institution. Most banks and NBFCs provide top-up loans on existing loans and students can make use of these schemes. If their bank does not offer such a facility, they can then approach other financial institutions for a top-up loan. They can even get their education loan refinanced or transferred to another bank. Refinancing a loan means paying off the old education loan with a new education loan that offers better terms and conditions. Whether they have taken an SBI Education Loan, Bank of Baroda Education Loan, Axis Bank Education Loan, or ICICI Education Loan; students can get it refinanced from leading banks and NBFCs. Scholarships - Scholarships are another excellent way to meet the increased expenses. Students who have good academic history have a higher chance of getting scholarships. However, other students too should try for the various scholarships that are available for them. To know more about the scholarships they are eligible for, they can visit GyanDhan’s scholarship bank. Choose suitable education loans - This advice can be heeded by students who are looking for the best bank for education loan. They can choose a bank that increases the loan amount with an increase in fees. In these cases, NBFCs like Avanse and Incred are preferred. Look for part-time jobs - Most countries allow international students to work for a fixed number of hours according to their Visa guidelines. Students can make the most of this opportunity and take-up on-campus or off-campus part-time jobs to earn a few extra bucks and take care of a part of their living expenses. Transfer money to student’s US bank account - Rather than waiting for the due date of fee payment, parents can transfer the fee money in installments to their child’s US bank account whenever there is a temporary dip in the US currency. This way, they will not have to face the rate of exchange - which might be lower - at the time of fee payment. Conclusion Though the falling rupee is not good for the Indian economy in general and Indian students headed for a foreign destination in particular, students need not shelf their plans of foreign education in fear of the falling rupee. Careful planning and execution, choosing the destination country carefully and a modest lifestyle in the foreign soil among other things will certainly help them realize their dream of foreign education.
This is a companion discussion topic for the original entry at https://www.gyandhan.com/blogs/impact-of-falling-rupee-in-education-loan